THE GRANDDADDY OF ALL TAKEOVERS

By PATRICIA O'TOOLE; Patricia O'Toole writes a column on business and social issues for Lear's magazine.

Published: January 21, 1990

BARBARIANS AT THE GATE

The Fall of RJR Nabisco.

By Bryan Burrough and John Helyar.

Illustrated. 528 pp. New York:

Harper & Row. $22.95.

TRUE GREED

What Really Happened in the Battle for RJR Nabisco.

By Hope Lampert.

259 pp. New York:

NAL Books/New American Library. $18.95.

Good news for everybody still baffled by leveraged buyouts (LBO's) and junk bonds: the Cliffs Notes have arrived in the form of two books on the 1980's biggest deal, the $25 billion sale of RJR Nabisco in 1988. The essentials can be gleaned from Hope Lampert's ''True Greed,'' which grew out of her reporting for Manhattan,inc., but readers of the longer ''Barbarians at the Gate'' by Bryan Burrough and John Helyar, who covered the story for The Wall Street Journal, will come away considerably more enlightened - and highly entertained.

LBO mania began, Mr. Burrough and Mr. Helyar tell us, in 1982, when a group led by the former Treasury Secretary William Simon bought Gibson Greetings by leveraging $1 million of their own money with loans of $79 million. Eighteen months later they sold the company for $290 million, and Mr. Simon pocketed $66 million on an investment of $330,000. It was the Wall Street equivalent of ''gold at Sutter's Mill,'' Mr. Burrough and Mr. Helyar write. ''Suddenly everyone wanted to try this 'LBO thing.' ''

Enter the lovable junk bond, which is simply a high-interest security on a riskier-than-average proposition. By working with underwriters of junk bonds, deal makers could finance their LBO's (the interest was steep but tax deductible, so what the heck?), and the high yields on the bonds helped money managers fatten their quarterly returns. Worries about mounting debt were pooh-poohed with the argument that leveraged buyouts ''actually strengthened the business community by cutting corporate flab and building leaner companies,'' Mr. Burrough and Mr. Helyar explain. Since the typical deal carried a price tag well above the market price of the target company's stock, the deal makers also claimed that LBO's would maximize shareholder value. It was this second notion that led RJR Nabisco down the LBO path.

A maker of cigarettes and food (Oreos, Ritz crackers), RJR Nabisco regularly turned in solid earnings gains, but its stock went nowhere. In vain, its chief executive, F. Ross Johnson, tried various tactics for lifting the stock price, and when his last hope, RJR's smokeless cigarette, produced little but ridicule, he decided shareholders would get their money's worth only from a leveraged buyout.

In October 1988, a group of the company's top executives led by Mr. Johnson and backed by the investment banking and brokerage house of Shearson Lehman Hutton announced plans to buy RJR Nabisco for $17 billion or $75 a share. Although corporate directors were required by law to open the bidding to all comers in order to get the highest price for shareholders, Mr. Johnson anticipated no real competition. His bid topped the stock's current market price of around $55 by a third and, he assured the board, it represented the company's true value.

But Mr. Johnson failed to appreciate that the sheer size of the transaction would activate the salivary glands of nearly every deal maker on Wall Street. The advisory fees alone would probably reach $200 million. The ensuing free-for-all, which pushed the bidding for the company up to $25 billion, is the substance of the twisting, turning plot of ''Barbarians at the Gate'' and ''True Greed.''

At the center of the action was F. Ross Johnson - fiftysomething, given to gold chains and longish hair, a sort of ''corporate Peter Pan,'' according to Mr. Burrough and Mr. Helyar. Easily bored, he was ''always in a hurry,'' an RJR Nabisco director told Hope Lampert. ''He couldn't wait to see if something worked before he tried something else.'' Mr. Johnson acknowledged his restlessness and disarmingly confessed to a penchant for stirring things up. One of Ms. Lampert's sources (echoing others in both books) said that Mr. Johnson also suffered from a ''corporate royalty complex'' and ''had trouble remembering what was his and what was the company's.'' Mr. Burrough and Mr. Helyar tell us that he kept two personal maids on the payroll, billed two dozen country club memberships to the company and built up a fleet of 10 corporate planes, unofficially known as the RJR air force. He also doled out millions to sports celebrities for golfing with his big customers and showing up at Nabisco-sponsored sporting events. The jocks were his buddies, and his air force was ever at their disposal. ''A few million dollars are lost in the sands of time,'' he liked to say.

At Mr. Johnson's right hand was Peter A. Cohen, the chairman and chief executive of Shearson, which had never done a leveraged buyout. ''It didn't even have a junk bond department,'' Ms. Lampert notes. Desperate to get into the LBO game and improve Shearson's lackluster earnings, Mr. Cohen accepted Mr. Johnson's demands for complete control of RJR Nabisco (including the power to veto his own firing) and a stake worth up to $2.5 billion to be shared by Mr. Johnson and a handful of other RJR Nabisco executives. Mr. Johnson backed off only when Mr. Cohen's boss, James D. Robinson 3d, the chairman of American Express, and others objected to the largess. Surprisingly, neither book points out that the loudest objections were not to the greed itself but the appearance of it.